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The rules allow banks to measure "risk-adjusted assets," so they have to hold little or no capital against low risk assets.
Low risk assets will cost less to investors and borrowed monies will cost more and be a bit harder to come by.
Bank balance sheets are notoriously opaque and susceptible to asset substitution (easy swapping of high risk for low risk assets), so stress tests, tailored to the situation at hand, can provide clarity by openly disclosing details of the results and approaches taken, allowing trust to be regained.
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"The Inmet Board has concluded that the First Quantum offer fails to adequately compensate shareholders for Inmet's low risk asset base and its strong prospects for growth and value creation at Cobre Panama," David R. Beatty, Inmet's chairman, said in a statement.
The good economic news caused investors to sell low-risk assets like government debt.
In the bond market, Treasury prices rose slightly as demand for low-risk assets stayed strong.
We owned a large portfolio of "very low-risk" assets which turned out to be high-risk.
United States government bonds are low-risk assets, for example, while car loans would be higher risk.
Basel 2, coupled with the leverage ratio, is forcing American banks to become even more efficient at shedding low-risk assets, making them riskier.
This should lead to higher rates of saving and a greater desire for low-risk assets, even well after the recovery.
The rules would also penalize banks in emerging countries, the institute said, because they have less access to low-risk assets.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com